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Mehta v. Physical Medicine and Rehabilitation Services of Hudson County

August 6, 2007

MONICA MEHTA, M.D., PLAINTIFF-APPELLANT, AND PHYSICAL MEDICINE AND REHABILITATION SERVICES OF HUDSON COUNTY, P.A., AND CENTER FOR EVALUATION AND TREATMENT OF ORTHO AND NEURO DISORDERS, A/S/O VIRELLA CLARK, PLAINTIFFS,
v.
ENCOMPASS INSURANCE COMPANY, DEFENDANT-RESPONDENT.



On appeal from the Superior Court of New Jersey, Law Division, Hudson County, L-4878-03.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued May 9, 2007

Before Judges Lefelt, Parrillo and Sapp-Peterson.

Plaintiff Monica Mehta appeals from the March 29, 2006 order of the Law Division denying her motion, pursuant to Rule 4:50-1, to reopen and to vacate the order entered March 15, 2005 in which the court granted partial summary judgment in favor of defendant, Encompass Insurance Company, in connection with its counterclaim. We affirm.

The events leading up to plaintiff's motion for relief from judgment arose out of defendant's refusal to pay plaintiff, the owner of three medical entities, for medical services performed by plaintiff on behalf of defendant's insured, Virella Clark, who had been involved in a motor vehicle accident in 1998. While still insured by defendant, Clark was involved in two additional accidents in 2001 and 2002 for which she was also treated by plaintiff. When defendant refused to pay personal injury protection (PIP) benefits in connection with the 2001 and 2002 accidents, Clark filed a complaint in the Law Division on January 22, 2003, seeking compensation for her personal injuries against the alleged tortfeasor from the January 2001 accident as well as against defendant for PIP benefits. Three weeks earlier, plaintiff instituted a subrogation action in the Special Civil Part seeking compensation against defendant for treatment allegedly rendered to Clark. Since the portions of the two complaints overlapped, Clark dismissed her PIP claim against defendant in the personal injury action, enabling Clark to pursue benefits directly against defendant. Defendant filed its answer to Clark's complaint on March 10, 2003. The court entered an order dated May 9, 2003, consolidating the two complaints.*fn1

In the Fall of 2004, after deposing Clark and plaintiff, defendant filed a counterclaim against plaintiff and her business entities alleging violations of the New Jersey Insurance Fraud Prevention Act (Fraud Act), N.J.S.A. 17:33A-1 to -30; common law fraud; and equitable fraud. Among the relief sought by defendant was a declaration that the Encompass policy was void as it related to Clark's direct claims and plaintiff's subrogation claims. After a number of adjournments, trial was scheduled for March 14, 2005.

In early February 2005, defendant filed a motion for partial summary judgment on the Fraud Act claim. Defendant alleged that plaintiff submitted two pre-certifications dated February 23, 2001, and February 27, 2002, which contained material misrepresentations. Specifically, defendant claimed that in response to the inquiry whether Clark had prior injuries, plaintiff wrote "none" and then affixed her signature to both pre-certifications. Defendant contended that in addition to violating the Fraud Act, plaintiff also breached the terms of the policy issued to its insured. Relying upon Longobardi v. Chubb Ins. Co. of N.J., 121 N.J. 530 (1990), defendant argued that because plaintiff breached the terms of the policy, it had no obligation to pay for services plaintiff provided. Defendant also alleged plaintiff engaged in double-billing.

Plaintiff, in opposition to the motion, certified that a secretary had incorrectly filled out the forms for both the 2001 and 2002 accidents and signed plaintiff's name on the pre-certifications without plaintiff's authorization. Plaintiff also argued that at the time the pre-certifications were submitted, defendant possessed Clark's medical records, was aware of Clark's prior injuries, knew the "none" responses on the pre-certifications were mistakes, and never paid plaintiff for the fees she sought. As such, plaintiff argued defendant sustained no losses, no damages, and thus no fraud occurred. Additionally, plaintiff denied double-billing for the treatment provided to Clark and claimed that any appearance of double-billing was attributable to Clark's mistaken memory.

On March 4, 2005, the motion judge granted defendant's motion and delivered her opinion orally from the bench:

The Court is satisfied . . . that [defendant] . . . is entitled to the relief sought. Based on the evidence advanced, this Court is able to find that [plaintiff] has materially breached the terms of the policy. And the Court by finding that, finds that the policy is void [retroactive to the 2001 accident] as to the claim in this complaint.

As to their second point, the Court finds that there is evidence that there has been a violation of the Fraud Act, and the defendant . . . certainly has a right to seek damages. There is no question that . . . there is evidence of liability under the Fraud Act. . . . [T]here is no evidence that has been advanced that contradicts the evidence advanced by the movant in this matter.

Although the motion judge placed her opinion on the record on March 4, 2005, the order was not signed until March 15, 2005. In the interim, a flurry of negotiations between the parties took place, beginning with a March 7 telephone call between plaintiff's counsel, Ralph J. Pocaro, and defense counsel, Edward J. Rebenack. Pocaro advised Rebenack that plaintiff had authorized him to settle defendant's counterclaims for $25,000-$30,000. Rebenack told Pocaro he would discuss the matter with his client. On that same day, Pocaro wrote a letter to the court objecting to the form of the summary judgment order. Specifically, Pocaro advised the court that defendant had notice of Clark's pre-existing injuries and attached copies of medical reports to support this contention. Also on March 7 Rebenack submitted to the court a response to Pocaro's letter. Rebenack urged the court to sign the proposed order, noting that the objection did not assert that the proposed order failed to reflect the court's ruling but rather was an objection based upon the merits, for which the appropriate remedy was a formal motion for reconsideration pursuant Rule 4:49-2.

The next day, Pocaro and Rebeneck had several telephone conversations during which they negotiated the amount plaintiff would pay in settlement, ultimately settling on $40,000. Pocaro requested that defendant consent to vacating the partial summary judgment order and also refrain from referring the case to the Office of Insurance Fraud Prosecutor. Rebenack advised Pocaro his client would not consent to the requests.

Later on March 8, Rebeneck faxed Pocaro draft releases and written confirmation of the terms of the settlement agreement.

In his cover letter, Rebenack advised Pocaro that "[d]uring our conversation this morning, you requested that I consent to vacate the summary judgment ruling. I advised you that I cannot consent to same and that I intend to obtain the order. I will provide you with a copy of same upon my receipt." Pocaro then called Rebenack, renewing his request that defendant consent to vacate the summary judgment order. Rebenack again conveyed defendant's refusal. Pocaro then asserted that plaintiff would not pay the settlement monies previously agreed upon. Rebenack then faxed a letter to Pocaro dated March 9, reiterating defendant's position and his intention to file a motion to enforce settlement and a second motion for summary judgment alleging additional Fraud Act violations.

Rebenack claims Pocaro called him later on March 9 to inform him that the draft releases were being sent back with proposed modifications and that plaintiff would not be seeking to vacate the summary judgment order. Apparently, the proposed modifications were in plaintiff's handwriting. She wanted an amendment reflecting that her suit against defendant only addressed the 2002 accident, not the 2001 accident, and a clause stating that the release was not an admission of liability on the part of plaintiff. Defendant agreed to these modifications.

By letter of March 10, plaintiff's counsel forwarded the executed release as amended and a check for $40,000 to defense counsel. By separate letter, plaintiff's counsel advised the court of the settlement. Plaintiff requested that the court amend the proposed order to reflect that there was no longer a double-billing claim against plaintiff in light of a certification executed by Clark that Pocaro had attached to his correspondence. In the certification dated March 9, Clark stated that "although I stated in my deposition that I did not receive a [TENS] machine, I did indeed receive the same in 2001 given to me by Dr. Monica Mehta, MD." The March 15 order signed by the motion judge did not include the requested amendment. Rather, the order stated that the "[c]court considered objection to this order, but finds no basis to change this order which properly reflects [the] court's ruling. Objection really seeks reconsideration or modification for which formal motion is necessary."

Thereafter, plaintiff, through Pocaro and a number of different attorneys, unsuccessfully attempted to engage defense counsel in post-settlement negotiations related to vacating the partial summary judgment order. By letter dated March 31, Pocaro instructed Rebenack not to file the stipulation of dismissal because plaintiff intended to file a motion to set aside the order. Eric Katz, who subsequently substituted in as plaintiff's counsel, was also copied on this letter. That motion was not filed at that time. Instead, on April 14, Pocaro filed the stipulation of dismissal with prejudice that Rebenack had previously prepared. It was not until seven months later on November 30, that plaintiff filed a motion seeking relief from judgment pursuant to Rule 4:50-1. By then, plaintiff was represented by Katz. Although the motion was originally returnable December 16, for reasons not set forth in the record, it was not heard until March 29, 2006.

Plaintiff's counsel argued that relief from judgment was appropriate on a number of grounds, including mistake and excusable neglect under section 1(a) of the rule because plaintiff did not understand the ramifications of the partial summary judgment order based upon assurances from her former attorney that she had nothing to worry about from the fraud judgment because she had satisfied the judgment and that in any event he could not represent her on any appeal because of his poor health.

Plaintiff's counsel also argued that relief from judgment was appropriate under section 1(b) because of "newly discovered evidence that just came up in the opposition papers that were submitted by Encompass, where they conceded that they never even relied upon the one document which your Honor found constituted the fraud in this case, the pre[-]certification form."

Finally, counsel argued that under the catchall section of the rule, 1(f), any other reason justifying relief from the order, that there was no evidence before the court in the form of certifications, affidavits, or depositions from any "Encompass representatives indicating that they relied upon these [pre-certification] forms or that they were material in making their coverage decisions" and plaintiff had ...


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